Ian Cowie was named Consumer Affairs Journalist of the Year in the
London Press Club Awards 2012. He has been head of personal finance at
Telegraph Media Group since 2008, having been personal finance editor
since 1989. He joined the paper in 1986. He is @iancowie on Twitter.

Other major motor insurers, including Aviva and RSA, say the sector is facing a ‘perfect storm’ of rising personal injury claims, legal fees and fraud. But independent experts at the British Insurance Brokers Association (BIBA) say companies are repricing cover in an attempt make profits after many years of losses – especially insurers owned by banks which nearly went bust during the credit crisis – and intervention by the European Union may force premiums even higher.

“Bodily injury claims have soared in number and value, partly because of the activities of personal injury lawyers. Now, for example, while the average claim after an accident from male policyholders aged between 30 and 50 is £1,450 – or just £1,200 from women in that age group – the average claim from men aged between 17 and 22 is £4,473 and £2,734 for women in that age group.”

Nigel Bartram, motor underwriting manager at Aviva, which covers about one in 10 British cars, said: “It is an unprecedented increase in premiums but everybody has been surprised by the increase in bodily injury claims.

“In the past, people who were involved in an accident might not bother to claim for minor injuries, such as a sore neck. But since the start of the recession, many more are deciding to see what they can get. As a result, insurers paid out £1.23 for every £1 in motor premiums they received in 2009 and reserves have shrunk.”

Mark Christer of RSA – which owns Moreth>n – added: “I don’t think the industry has made a profit for more than five years and suddenly bodily injury claims have rocketed. Where one person might make a claim for whiplash injuries after an accident a few years ago, now everybody in the car makes a claim.

“There has also been a sharp increase in fraud, partly as a result of improved methods of detecting and deterring uninsured drivers. Some of the formerly uninsured fraternity are setting out to obtain an insurance certificate by any means – such as a recent case where a 21 year old man driving a BMW claimed to be a 46 year old driving a Mini.

“Unfortunately, he was involved in an accident where other people were seriously injured and there was a bodily injury claim for £5m which, under the terms of the Road Traffic Act, had to be picked up by the last insurer that touched him.”

“Insurers used to be able to rely on investment income to make ends meet but that has reduced in recent years. Royal Bank of Scotland (RBS) subsidiaries such as Direct Line and Churchill have definitely put up prices – we have seen that – and are believed to be for sale, while another of the bank’s insurance subsidiaries, NIG, has announced it is withdrawing from writing personal business.

“After many years of losses, motor insurance has reached a tipping point – and now the European Union is imposing new solvency rules, requiring stricter capital adequacy ratios. This means insurers will have to be more cautious in future and keep more money on their books.”

Just about the only good news for hard-pressed motorists is that there is still plenty of choice and competition to provide cover. There is no need to suffer in silence if a renewal notice contains a shocking price rise; you can always shop around and take your business elsewhere.